Monday, June 15, 2015

Active rigs:

	6/15/2015	06/15/2014	06/15/2013	06/15/2012	06/15/2011
Active Rigs	76	187	185	214	174

RBN Energy: what happens to new NGL infrastructure if production growth slows?

I had expected the Director's Cut to be released today, but The Williston Herald says it will be released this Friday.

Comment: there are some really huge wells being reported today. Then look how far some of these wells have been choked back, or taken off line for operational reasons (neighboring wells being fracked). So many story lines.

For example, look at this well. In the first 15 days of production, 32,000 bbls of oil, and then taken off-line for almost two months (in this case it might have been taken off line because neighboring wells were being fracked) but the result is the same:

28493, 3,444, Whiting, Tarpon Federal 24-20-1RTF, Sand Creek, t12/14; cum 85K 4/15:  

Pool	Date	Days	BBLS Oil	Runs	BBLS Water	MCF Prod	MCF Sold	Vent/Flare
BAKKEN	4-2015	28	16047	16392	7537	29308	28529	725
BAKKEN	3-2015	31	33684	33258	15369	93905	91577	2267
BAKKEN	2-2015	5	2780	2418	2895	6864	6239	615
BAKKEN	1-2015	0	0	285	0	0	0	0
BAKKEN	12-2014	15	32013	31728	19724	84411	0	84381

There are at least four ways producers are able to cut back in the Bakken: a) complete the wells, but leave them on-line only some days of the month; b) complete the wells, produce every day, but "choked back"; c) drill to depth, but do not frack them; and, d) complete them but then shut them in. It appears that one producer may be doing this on a regular basis; I have to follow a few more months to see; the data is not yet scanned in the file reports to confirm.

The wells that came off the confidential list today whose production was cut way back was/were probably due to operational reasons associated with pad drilling (neighboring wells being fracked).

However, it is clear many wells are being choked back due to the slump in oil prices. I see that when I update production numbers from wells drilled as far back as 2013.

This is the story line that jumps out at me. Many analysts now suggest that the Bakken, Permian, and Eagle Ford et al, not Saudi, will be the swing producer, able to increase/decrease production quickly to meet supply and demand requirements. Someone suggested that it may not be all that easy for the tight / unconventional / shale / US producers to ramp up all that quickly. The argument is that too many rigs are idled, and too many roughnecks have departed the fields because of too little work. The argument is it would take several months to get those workers back and the rigs back up. When I see huge wells (20,000 bo per month) being cut back to 4 days of production or being choked back to 4,000 bo per month, this tells me it will be very, very easy for US unconventional oil producers to ramp up very, very quickly.

When you think about it, it's quite an amazing story. Assuming the producers remain solvent and can continue drilling, they are effectively storing their oil below ground -- not paying direct costs for storage, and yet they can turn on the spigot at a moment's notice. And they can pick and choose which wells they want to access.

The downside: it is my understanding that over time, sand and ceramic (proppant) deteriorate at depth.

The second story line is that some uninformed observes will see a Bakken well produce 20,000 bbls of oil in the first full month of production, and then drop to 1,000 bbls of oil the second month, and will alarm folks suggesting this is how bad the decline rate is in the Bakken.

Of course, it immediately follows that this will play havoc with folks like me who try to understand the Bakken decline rates and how much progress is being made to improve the rate.

So, again, I think the wells coming off the confidential list today that show huge drops in production in the 2nd, 3rd, or 4th months, that may be due to operational reasons associated with pad drilling.

This might be a better example, posted last week. It's difficult to know when wells are taken off-line due to operational reasons or for economic/financial reasons, and it's not all that easy to tell when wells are being choked back, but looking at many, many production profiles, one starts to get a feeling.